Systematic Investment Plan

EARLY INVESTMENTS RAISES BENEFITS

NURTURING CHILD’S FUTURE

A DREAM WEDDING

LIFE AFTER RETIREMENT

WHAT IS SYSTEMATIC INVESTMENT PLAN OR SIP?

 SIP works on the principle of regular investments. It is like your recurring deposit where you put in a small amount every month. It allows you to invest in a MF by making smaller periodic investments (monthly or quarterly) in place of a heavy one-time investment. Though investments through SIP may not seem appealing at first, it enables investors to get into the habit of saving. And over the years, it can really add up and give you handsome returns.

 While making small investments through SIP may not seem appealing at first, it enables investors to get into the habit of saving. And over the years, it can really add up and give you handsome returns. For instance, a monthly SIP of Rs 1000 at the rate of 9% would grow to Rs 6.69 lakh in 10 years, Rs 17.83 lakh in 30 years and Rs 44.20 lakh in 40 years.

FEATURES OF SIP

Power of compounding

It is recommend that one must start investing early in life. One of the main reasons for doing that is the benefit of compounding. Let's explain this with an example. Age of Investment ( Start) Monthly Investment No of years Total Investment Rate of Returns Corpus Built 25 years 5,000.00

35 2,100,000.00 15% 73,385,901.00

30 years 5,000 .00

30 1,800,000.00 15% 34,616,398.00

RUPEE COST AVERAGING

  This is especially true for investments in equities. When you invest the same amount in a fund at regular intervals over time, you buy more units when the price is lower. Thus, you would reduce your average cost per share (or per unit) over time. This strategy is called 'rupee cost averaging'. People who invest through SIPs capture the lows as well as the highs of the market. In an SIP, your average cost of investing comes down since you will go through all phases of the market, bull or bear.

Regular Date June 2012 July 2012 Aug 2012 Sept 2012 Oct 2012 Nov 2012 Investment (Rs.) 5000.00

5000.00

5000.00

5000.00

5000.00

5000.00

Price per Unit (Rs.) 10 9 9 8 7 8 No. of Units received 500.00

555.56

555.56

625.00

714.29

625.00

 It's a way of making the value of your investment grow at the same time as removing the difficulty of "timing the market". In the long run, investing on a regular basis also helps to reduce your overall risk.

 Let us see another example :

PUBLIC PROVIDENT FUND VS MUTUAL FUND SIP

 The returns of long term SIP’s in some of the selected schemes are shown below : 

For 10 Years : Scheme Name Birla SL Frontline Equity Fund(G) Franklin India Bluechip Fund(G) HDFC Top 200 Fund(G) Total Amount Invested(Rs) 1,20,000.00

1,20,000.00

1,20,000.00

Present value(Rs) 2,84,418.55

2,58,987.02

2,79,434.58

XIRR(%) 16.6920

14.9254

16.3591

Returns For 10 Years

16,3591 14,9254 16,6920

Birla SL Frontline Equity Fund(G) Franklin India Bluechip Fund(G) HDFC Top 200 Fund(G)



For 15 Years : Scheme Name Franklin India Bluechip Fund(G) HDFC Top 200 Fund(G) Reliance Growth Fund(G) Total Amount Invested(Rs) 1,80,000.00

1,80,000.00

1,80,000.00

Present value(Rs) 8,68,927.67

10,81,708.11

14,58,296.07

XIRR(%) 19.0813

21.5773 24.9669

Returns For 15 Years

24,9669 19,0813

Franklin India Bluechip Fund(G) HDFC Top 200 Fund(G) Reliance Growth Fund(G)

21,5773